Area CEO pay up 81% in 2011

By David Hendricks :
July 6, 2012
: Updated: July 7, 2012 1:18am

Lanham Napier is the public face of one of the most successful technology companies ever started in San Antonio. Napier has guided Rackspace Hosting Inc. through a period of unprecedented growth since taking over as CEO 4 years ago.

Photo By COURTESY PHOTO

Greg Goff

Bill Klesse

Photo By COURTESY PHOTO

Dick Evans, Chairman and CEO of Cullen/Frost Bankers Inc.

Photo By EDWARD A. ORNELAS/SAN ANTONIO EXPRESS-NEWS

San Antonio activist investor Sardar Biglari has received support from shareholder advisory firm Glass, Lewis & Co. in his bid to win a seat on the board of Tennessee-based Cracker Barrel Old Country Store Inc.

Lifted mainly by rising stock values, the top executives at San Antonio's public companies cumulatively earned 81 percent more in pay in 2011 than the year before, according to an Express-News compilation of federal securities filings.

Total pay for area CEOs and, in many cases, their second-in-commands, rose in 2011 to $86.48 million for 22 selected companies. That's up from almost $47.8 million in 2010 from 20 of the same companies.

The top-earning area CEO in 2011 was A. Lanham Napier of Rackspace Hosting Inc., a leading server-hosting and cloud-computing company with a national presence. Napier earned only $400,000 in salary and another $463,403 in “other pay” that could include Rackspace shares and other incentives.

But Napier also gained $17.02 million in previous stock options and vested stock awards, a windfall that by itself accounts for much of the large jump in the area's cumulative executive pay. That comes to a total of $17.88 million for Napier in 2011.

The second-, third- and fourth-largest executive earners in the area also garnered large 2011 pay gains from stock options and vested stock awards in amounts that surpassed their base salary.

The growing practice of compensating executives with their company's shares ties the decisions they make to the value of the company to shareholders, said Stephen Werling, president of Werling Associates Inc., a San Antonio human resources management and consulting firm that compiles compensation data.

The value of good executives sometimes goes beyond their companies, Werling pointed out.

“The decisions Napier has been making are changing the workforce in San Antonio,” Werling said, referring to the computing expertise the company has hired and developed. “Just look at the growth of Rackspace,” Werling said.

Perks

Public companies report their perquisites, or “perks,” in U.S. Securities and Exchange Commission filings as compensation that falls outside of basic salary, bonuses and stock options.

Cullen/Frost Bankers' Evans, for example, is allowed to use a company jet for business and personal travel, up to 200 hours per year, but his nonbusiness travel last year amounted to just about 3 percent of his limit. Evans also received company-paid home security, club membership and personal financial planning services.

Valero officers receive company-paid club dues, income-tax preparations and tickets to sporting and entertainment events but do not enjoy automobile allowances, supplemental medical benefits or personal use of a company jet.

Top executives at New Braunfels-based Rush Enterprises Inc. receive use of the company ranch and corporate aircraft along with company-paid home security, parking and automobile and gasoline allowances.

At International Bancshares Corp., Chairman, CEO and President Dennis Nixon and his family use a company jet for business and personal travel on the recommendation of a security consultant, who cited the company's headquarters “in Laredo on the Texas/Mexico border.”

At Alamo Group Inc., directors agreed to “reimburse certain expenses in connection with (CEO and President Ronald Robinson's) commuting from his home in Colorado Springs, Colo., to the company's corporate office in Seguin, Texas, including commercial airfare, hotel and car rental.”

An automobile and driver is provided by San Antonio-based CC Media Holdings Inc. to its CEO, Robert Pittman, who works in New York City. Pittman also received personal use of the company aircraft, paid legal fees and club memberships.

Pioneer Drilling Co. perks for top executives include a car allowance and Petroleum Club dues.

Paying with stock

Tying more executive pay to stock options rather than to salary or bonuses has been a goal of the corporate governance reform movement but has become a tricky question, said Ralph Ward, author of several corporate governance books.

“It leads to corporations owing their primary obligations only to shareholders,” Ward said. “Managers manage stock prices, and that's it.” Such practices could become detrimental to companies' long-term interests and to its social obligations, he added.

The Washington-based Economic Policy Institute in May reported that the gap between CEO compensation and that of a typical worker is now 231-to-one. It was 58.5-to-one in 1989, the institute said in a report implying that productivity gains through the decades have benefited executives more than workers.

But the national figures are highly misleading, Werling said, and such a gap does not exist in the San Antonio area.

Citing his company's own San Antonio Area Wage and Benefit Survey, Werling said that 2011 executive pay was 44 times annual average pay. When the top four CEOs, with their large lump sum stock gains, are subtracted, the local ratio falls to 25 times annual average pay.

“A lot of companies don't like to calculate those ratios” for their proxy statements, Ward said. “It raises the question of what is compensation versus the value of stock options. CEOs could have cashed out what had accumulated over previous years. It looks worse than it really is and tells us less than we think it does,” Ward said.

The 231-to-one figure reported by the Economic Policy Institute probably includes some large payoffs for executives such as Facebook's co-founder Mark Zuckerberg, now worth about $20 billion, Werling said.

“I don't think these should be lumped in with everyone else,” Werling said. “I think some executives are overpaid, but when I see (the San Antonio area) list, I don't think so. They are being paid properly for what they are doing,” he said.

Even in extreme cases such as Zuckerberg, a large differential in pay from average workers is justified by their wide influence, Werling said.

“He changed society. If he makes money doing that, so be it,” he said. “That's different than just showing up at work.”